Birkenstock raises annual forecasts due to strong demand and full-price sales

On Thursday, Birkenstock heightened its annual revenue and core profit predictions, relying on full-price selling and a sturdy demand for its cork-based sandals and newly released closed-toe designs. Primary sales outlets include their stores, which contributed to a 14.3% increase in their stocks. Majority of wholesale retailers continue to stock popular Birkenstock products, despite a broader initiative to minimize inventory due to lessened demand for discretionary items such as footwear.

According to Birkenstock CEO Oliver Reichert, the company plans to raise the shelf space at their wholesale partners. Additionally, significant retailers are purchasing more and moving volumes to earlier delivery dates. The distinguished German sandal producer has also widened its stores, where their products fetch full price, which is commonly higher than the average price at wholesale establishments. This strategy led to a more than 30% growth in their direct-to-consumer (DTC) revenue in the second quarter, whereas the wholesale revenue rose by 19.2%.

'The 'Barbie' boost was assumed to decrease, but as the brand remains favored by influencers, the sandals are still in demand in the fashion industry, resulting in a sales increase,' remarked Susannah Streeter, the Manager of Money and Markets at Hargreaves Lansdown. Birkenstock predicts the fiscal 2024 revenue to be between 1.77 billion euros and 1.78 billion euros, which is a rise from the earlier estimated 1.74 billion euros to 1.76 billion euros.

The company projects annual adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to be between 535 million euros and 545 million euros, an increase from the previous expectation of 520 million euros to 530 million euros. However, Birkenstock's adjusted EBITDA margin for the quarter dropped by 470 basis points to 33.7% due to its global expansion and production investment plans.

'Investors are focused on the impact of this DTC expansion. If the expansion is successful, it would reduce the typical business volatility that comes with wholesale exposure while strengthening brand control,' stated Javier Gonzalez Lastra, the luxury-centric portfolio manager at Tema ETFs.

In the second quarter, Birkenstock's revenue jumped by 21.6% to 481.2 million euros ($520.23 million), surpassing the LSEG prediction of 466.1 million euros. The adjusted profit per share reached 0.41 euros, outperforming the estimated 0.36 euros.